Can you deduct your property taxes?

The money you put into your property taxes goes toward public services provided by your local government. Whereas property taxes were once based solely on the size of your plot of land, nowadays property worth is taken into account. That means that a vacant lot will be taxed less than a lot with a high-rise apartment building. Considering that you pay a good amount of your paycheck to cover local property taxes, it's only fair that you deduct what you paid out when you calculate your personal income taxes. Generally, you're allowed to subtract whatever you paid in state, local and foreign real estate property taxes from your income tax. The conditions for being able to deduct those taxes are that they go toward overall public welfare, they're based on your property's assessed value and all of the properties in that assessment area are subject to the same tax rate.

However, you're not allowed to deduct taxes that make your property more valuable or that go to local benefits, like sidewalks and sewer systems. Sometimes, though, local benefits are tax deductible, particularly ones that relate to maintenance and repair. The IRS Web site has more information on which property taxes are deductible.

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You need to file a 1040 long form and a Schedule A in order to deduct real estate property taxes from your income tax. However, sometimes the standard deductions are more beneficial. Licensed tax consultants can help you figure out which deductions save you the most money. Second homes are also valid sources of tax deductions. Your mortgage interest and property taxes are considered deductible, as long as you itemize the payments and those property taxes meets the same criteria stipulated for your permanent home.